It’s really tough to tell what’s to happen between Canada and the U.S. on trade going into the second half of the year. Undoubtedly, buying or selling stocks based on predictions of what’s to happen with Trump’s tariff war could be ill-advised. Either way, I think long-term investors should stay focused on the long-term horizon, as we gain more clarity on the next steps in the coming months and quarters.
Of course, the latest U.S. court move to block sweeping Trump tariffs seems to be good news. Though the market reaction seemed quite confused, given the complexities of the matter. Also, many tariffs that were announced prior to “Liberation Day” could stick, even if the U.S. court has its way. Indeed, there is room for optimism, but we’ll gain more visibility in the coming weeks regarding what Trump does next with his tariffs.
In any case, several TSX stocks could be in for a relief rally if a Canada-U.S. deal were to be inked at some point over the months. With so many tariff fears already priced in, perhaps the following names could be great value plays for investors who have the stomach to deal with the steep ups and downs.
Here’s one intriguing value stock that may very well be an upside mover if a Canada-U.S. deal can be worked out at some point over the next year.
Magna International
Magna International (TSX:MG) stock has surprisingly been in recovery mode in recent weeks. Since the April lows, the stock is up close to 15%. And while the road ahead could get a whole lot bumpier from here, I do think that any progress in trade talks could be a boon for shares of MG, which have been oversold for a number of years now. Indeed, talks of tariff exemptions on auto parts have acted as a huge relief to shareholders and the management team, who are growing a bit more upbeat about the road ahead.
Shares of the $14.1 billion auto-part maker are starting to look ridiculously cheap, now going for 9.1 times trailing price-to-earnings (P/E) or 7.7 times forward P/E. The dividend yield, which is currently at 5.4%, is also quite swollen and fairly well-covered, even if tariff talks between Canada and the U.S. don’t lead to any sort of deal over the near-to-medium term.
Even if a new trade deal or exemptions lift a bit of a weight off the firm’s shoulders, there’s the economic environment ahead to worry about. Recently, a prominent analyst at RBC Capital downgraded shares of MG, citing the changing macroeconomic landscape as a potential cause for concern. Indeed, production could stay softer for longer, especially if we are dealt some sort of recession over the next 6–18 months. The coast isn’t quite clear for Magna, but if you’re a deep-value investor who’s in the market for a towering dividend yield, I’d not be against starting to buy at around $50 per share.
The bottom line
In short, Magna looks like a deep-value dividend play after its first-quarter flop. Add upside from a potential U.S.-Canada trade deal into the equation, and I’d not shy away from the nearly 5.5%-yielding dividend if you’re in the market for low-cost passive income.
